Vertical Spreads: Capture Profit with Lower Cost | #OptionsHandbook EP047
Ever struggled with this dilemma: buying an option costs too much, but selling an option alone feels way too risky?
Don’t worry! With vertical spreads, you can cut costs, cap losses, and trade with confidence.
In The Options Handbook, you’ll find four main types of vertical spread strategies. Let’s take a look! (And join the events at the end to win rewards!) 🎁
▶ What is a Vertical Spread? 🤔
A vertical spread means buying and selling options on the same stock, with the same expiration date, but at different strike prices.
In this way, you profit from price movements in the underlying stock while using the premium you collect from selling one option to offset part of the cost of buying the other.
▶ Bull Call Spread 🚀
A classic and cost-effective bullish strategy. If you’re optimistic about a stock going up, you can try this:
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Suppose Stock A is trading at $100, and you expect it to rise.
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Buy one call option with a $100 strike price for $5 ($500 total).
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Sell one call option with a $110 strike price for $2 (so you receive $200).
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Net cost: $500 - $200 = $300. This is also your maximum loss.
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If Stock A rises to $110 at expiration, your profit is: (110 - 100) × 100 - $300 = $700.
Compared to buying a single Call, this strategy costs less. And unlike selling a naked Call, your loss is capped. It’s ideal for traders with limited capital who still want to participate in options trading.
▶ Both Bullish and Bearish Spreads Work 📊
Once you understand the Bull Call Spread, the other three strategies become easy(Charts for each are included in the book 📘):
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Bear Put Spread: For bearish markets, buy a put with a higher strike price and sell a put with a lower strike price.
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Bull Put Spread: Sell a put with a higher strike price and buy a put with a lower strike price, great for a conservative bullish outlook.
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Bear Call Spread: Sell a call with a lower strike price and buy a call with a higher strike price, ideal for a conservative bearish view.
▶ Summary ✨
Compared to single-leg option trades, vertical spreads help reduce costs and margin requirements while effectively controlling risk.
Plus, even if the underlying stock doesn’t move much, spreads can still improve your probability of profit. Overall, they’re a smarter, more cost-effective choice!
🎉[Mini Events]🎉
How to Join
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Flip to Chapter 5 of The Options Handbook and find other charts of vertical spread. Snap a photo and post it in the comments! 📸
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No handbook? Just share one of your recent options trades!
Prizes
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🎁Participation Reward: 10 Tiger Coins for every valid comment.
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📓 Scholar Award: Participants who leave insightful comments will receive a free copy of The Options Handbook!
Event Period
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📅 Sep 11, 2025 → Sep 19, 2025
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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